DCMA Stands-up Its Commercial Item Determination Group

The Defense Contract Management Agency (DCMA) established a Commercial Item Group (CIG) in response to Congressional direction to DoD to establish a cadre of experts to leverage the use of commercial items and emerging technologies.

DoD has now approved DCMA CIG contracting officers to serve as determining officials for commercial items. DCMA CIGs have been trained and have developed "expertise" in a multitude of commodity groups spread across six geographical locations:

• Boston - maintenance, repair, and overhaul (MRO) services, chemicals and materials
• Philadelphia - naval transport and equipment, troop supply
• Phoenix - heavy machinery, missiles
• Indianapolis - automotive, aeronautics, aircraft engines
• Denver - space, C41, unmanned aerial systems
• St. Petersburg - vehicles, weapons, ammo

Effective now, DCMA CIG contracting officers will serve as determining officials for all commercial item review requests submitted to DCMA. Such determinations will relieve buying activity PCO's (Procurement Contracting Officers) from duplicating effort such as trying to determine wether the item being offered meets the definition of commercial item as well as provide consistency in the commerciality review process.

Determinations made by the DCMA CIG will be contained in the commercial item database available for all DoD contracting officers to rely upon for future purchases of the same item or service. 

Contractors who sell commercial items to the Government should ensure that information entered into the DoD wide commercial item database accurately reflects their products and services.

DoD Needs to Enhance its Commercial Item Determination Process

The Department of Defense prefers to buy goods and services from the commercial marketplace to take advantage of new innovations and save on acquisition costs. However, DoD's process for determining whether an item can be purchased commercially - and at a fair and reasonable price - is often long and challenging. This was GAO's (Government Accountability Office) conclusion in a recent report (see Improved Information Sharing Could Help DOD Determine Whether Items Are Commercial and Reasonably Priced.

DoD's process for determining if an item is available for purchase in the commercial marketplace at a reasonable price includes (i) market analysis, (ii) commercial item determination, (iii) price reasonableness determination, and finally, (iv) contract award. Sounds simple but its not. It takes a long time and these steps are usually challenging. GAO found four interrelated factors, each with its set of challenges that influenced how and whether DoD determines if an item is commercial and if its price is reasonable. These factors include:

1. Availability of marketplace information. Market research is a key component that informs commercial item and price reasonableness determinations. However, GAO found that obtaining market-related information can be challenging because the products DOD requires may not be widely available in the commercial marketplace.
2. Ability to obtain contractor data: When adequate market information is not available, DOD officials turn to the contractor for information to support the commercial item determination or data to make a price reasonableness determination. In the case studies GAO reviewed, most contractors provided relevant information, but not without delays and challenges. For example, while pricing data is key to DOD’s ability to determine price reasonableness, several contracting officers reported that contractors were less willing to provide this data once an item was determined commercial.
3. Extent of modifications to an item: When a commercial item must be modified to meet DOD’s requirements, DOD officials may have to take additional steps, such as completing a comparative analysis of commercial items to the modified item. For example, in one case, a commercial navigation system had to be modified to withstand an explosion. To make the commercial item determination DOD officials had to make an on-site visit to the manufacturer to gain in-depth understanding of the services provided and to ensure they met DOD requirements.
4. Reliability of prior commercial item determinations: Contracting officers may presume that an item is commercial if a DOD component had previously made that determination. However, GAO found that, in some cases, contracting officers reviewing a prior determination discovered that it was based on inaccurate information.

It seems to us that prospective contractors are not doing themselves any favors by withholding information necessary for the Government to determine price reasonableness (factor no. 2, above). The only justification we can surmise is that prospective contractors do not want the public to know prices afforded to customers or perhaps they're trying to sell to the Government at a higher price.

GAO recommended that DoD develop a strategy for how information related to reasonableness determinations should be shared across the Department. DoD agreed.

Commercial Item Determinations - Minor or Major Modifications

The Army awarded a sole-source commercial item contract to AAR Mobility Systems for environmentally controlled shelters which can be mounted on the Army's family of medium tactical vehicle platforms. AAR had been manufacturing these shelters in various configurations for all services of the military for many years.

Gichner Systems Group, Inc. challenged the Army's determination that AAR's shelter is a commercial item. Although Gichner acknowledged that the basic shelter is a commercial item, it argued that the modifications required by the solicitation are not minor changes as provided in the FAR (Federal Acquisition Regulations) definition of a commercial item.

Gichner stated that unlike a standard, commercially available 20-foot ISO container, the Army required a shelter that is divided into three compartments and includes patented features such as integrated jacks, roller plates on the bottom of the shelter, and detent rails that lock into a military-specific material handling system.

The GAO found that the Army's judgment was reasonable.

The FAR defines a commercial item to be:

(1) Any item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and   (i) Has been sold, leased, or licensed to the general public; or   (ii) Has been offered for sale, lease, or license to the general public;* * * * *(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but for--
   (i) Modifications of a type customarily available in the commercial marketplace; or   (ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. Minor modifications means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. . . .

According to GAO, Gichner focused on the wrong definition. Gichner focused on definition 3 above but the GAO found that AAR's shelter meets the commercial item definition based on the first paragraph. AAR's shelters are regularly used by a variety of commercial industries for transportation, storage, and housing options and therefore meets the criteria for commercial item. The record shows that the shelter was offered on its website to the general public - the only modification required would be tailoring the location of partition walls, doors, and entry panels to meet the Army's specific space requirements.

Therefore, GAO concluded that the Army reasonably determined that the shelter is a commercial item.

You can read the full bid protest decision here.